Christian Business Networking Association

HARP 2 - Your Appraisal Solution?

On December 1, 2011 the Federal government expanded their HARP refinance program and may have created the first really significant solution to the depressed world of real estate. The acronym stands for Home Affordable Refinance Program. It is designed to help homeowners that have performed according to the requirements of their mortgage but the value of their home has gone down based upon market conditions. These borrowers are not going to sell their home but are trapped in higher interest rates due to the low appraised value of the home.

Much has been written about the real estate drag on the economy and the inventory of foreclosed homes that will continue to hold down home prices. But many have overlooked the link between consumer spending and managing the largest debt most Americans have - the home loan. During the boom years, consumer spending was at all time highs fueled in great part by low rates and easy refinance terms that allowed large equity withdrawal from the home value increases.

In today's market the dynamics of home lending have almost reversed. The Affordability Index is at record lows which means it is an excellent time to purchase a home. Currently the index rests at 12.9% of median income being allocated to median home costs. That is down from 29% at the height of the market. That is fine if you can buy but doesn't help if you want to remain in the current residence.

The expansion of HARP directly addresses the good American trapped in a higher interest rate with a lower value and they have been making their payments on as scheduled. The program allows for a loan to value of up to 150% as long as the purpose of the loan is to lower the rate and term only. No cash out is allowed and the property must be the primary residence. By example a homeowner with a $200,000 current balance at a 6.5% interest rate may be able to refinance at a current 4.125% rate. They would save $294 per month. History has shown that money will be converted into higher consumer spending or lower consumer debt. That is a significant stimulus to personal budgets and the national economy. If you multiply that by the projected volume of 1 million HARP loans in 2012 this can have a real meaning to the GNP.

To get specific information on this program talk to a qualified mortgage advisor. Generally here are the guidelines.

Must be Owner Occupied residence
Loan to value up to 125% allowed
25 and 30 year term fixed rates
Loan must be currently owned by FNMA
Borrower must meet standard credit requirements
Mortgage Insurance status Special conditions
- o No MI required if current loan does not have MI
- o MI remains at current levels if current loan has it
Current 2^nd lien/HELOC may be re-subordinated during refinance without limit to CLTV
Minimum credit score of 620